US President NAFTA plan 'workable' but pitfalls await - Analysts
And an aggressive push by the White House on its toughest demands could reduce Washington's ability to achieve a successful outcome.
Analysts warn that the aggressive push by US President Donald Trump's administration could reduce Washington's ability to achieve a successful outcome in NAFTA negotiations
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And an aggressive push by the White House on its toughest demands could reduce Washington's ability to achieve a successful outcome.
"If the US pushes Mexico too hard, they might make it impossible to reach an agreement," Antonio Ortiz-Mena, former head of economic affairs at the Embassy of Mexico in Washington, told AFP.
The three nations are due to start the talks next month on the 1994 pact that President Donald Trump once called "the worst trade deal maybe ever signed anywhere."
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In the negotiating goals released Monday, the White House said it will focus on reducing its bilateral trade deficits with each of its neighbors.
But Canada and Mexico already face bigger trade deficits as a share of their economies than the United States. Last year, the US trade deficit amounted to 2.5 percent of GDP, but Mexico's was 2.6 percent and Canada's 3.3 percent.
And economists say there is little that governments can do to make an impact on the deficit in any case.
It is true the US trade balance with Mexico became a deficit under NAFTA -- swinging from a $1.7 billion surplus in 1993 to a $55.6 billion deficit in 2016 -- but total trade with Canada and Mexico more than tripled, reaching $1.2 trillion by last year.
"I think this issue has been managed from a more emotional than an analytical perspective," said Ortiz-Mena. "It's very difficult to 'force' or 'compel' Mexico to buy more American goods."
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Obvious sticking points
With a presidential election coming in July 2018, Mexico may have severely limited room to give the Trump team what it wants.
"I think you're looking at a three-to-four month period of active negotiations before things get really dicey for Mexico's current government," said Scott Miller, a trade policy expert with the Center for Strategic and International Studies.
Also in July of next year, the US administration's fast-track trade negotiating authority -- which requires Congress to approve or reject trade deals without changes -- will expire. It can be renewed, but it adds additional pressure to the talks.
Among the obvious sticking points in the talks is Washington's desire to eliminate an infrequently used dispute resolution process under which a NAFTA panel can overrule individual countries' decisions on dumping and unfair subsidies.
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"I think it would be very difficult for Canada and Mexico to accept this," Ortiz-Mena said.
Another tall order is toughening origin rules for manufactured goods that benefit from duty-free trade -- crucial to the US auto industry's supply chain but a concern to Trump's "America First" trade policy.
Doable, given reciprocity
"There are always deal breakers in any negotiation," Miller said, and while the negotiating goals are quite general, there are issues that could become such deal breakers depending on how they are handled.
Still, economists say the talks present the opportunity for much needed upgrades to the existing trade framework, including provisions for e-commerce and commitments on labor rights that are currently only part of NAFTA side agreements.
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And environmental provisions that could be added are "orders of magnitude superior to what is in NAFTA today," said Jeffrey Schott of the Peterson Institute for International Economics.
The negotiating objectives published Monday are at least a workable basis for negotiations to begin, Ortiz-Mena said.
"I think that a lot of the 'asks' here are doable so long as there's reciprocity," he told AFP. "The US will have to exercise self-restraint out of enlightened self-interest."
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